Monty Company expects to have a cash balance of $58,410 on January 1,
2017. Relevant monthly budget data for the first 2 months of 2017 are as follows:
Collections from customers: January $110,330, February $194,700.
Payments for direct materials: January $64,900, February $97,350.
Direct labor: January $38,940, February $58,410.
Wages are paid in the month they are incurred.
Manufacturing overhead: January $27,258, February $32,450. These costs include
depreciation of $1,947 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $19,470, February $25,960. These
costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $15,576 in
cash. Monty Company has a line of credit at a local bank that enables it to
borrow up to $32,450. The company wants to maintain a minimum monthly
cash balance of $25,960. Prepare a cash budget for January and February.
Monty Company Cash Budget
January February
Beginning Cash Balance 58410 35695
Add Receipts
Collections from Customers 110330 194700
Sale of Marketable Securities 15576 0
Total Receipts

The ending cash balance of Jan is $ 68145 which is more than $58,410 . We get this balance after the borrowings. The cash balance is $   18172 for February .

Explanation:

Monty Company

Cash Budget

                                           January         February

Beginning Cash Balance        58410           35695

Add Receipts    

Collections from Customers 110330           194700

Sale of Marketable Securities 15576             0

Total Receipts                         125906          194700

Total available Cash               184316           230395

Less Disbursements

Direct Materials                   $64,900,         $97,350

Direct labor:                         $38,940,        $58,410

Manufacturing overhead:    $27,258,        $32,450

Depreciation                            ($1,947)      ( $1,947)  

Selling and

Administrative expenses:       $19,470,    $25,960.    

Total Disbursements              148,621       212,223  

Excess                                       35,695        18172

Financing

Add Borrowings                       $32,450         0

Less Repayments                       0                  0

Ending Cash Balance              68145           18172

Receipts are added to the cash balance to get the total available cash .

Total cash disbursements are subtracted from the total available cash to find the excess amount from which the repayments are subtracted and borrowings are added to get the ending cash balance.

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